E.g., 28-09-2021
E.g., 28-09-2021
We have found 13177 results.
View by: Grid List
Sort by: Relevancy Date
  • Please login, request a trial or contact our sales team for more information

    Gavekal Dragonomics

    Macro Update: The Next Step Down In Growth

    In our latest quarterly overview of the Chinese economy: monetary easing has done little to reverse the slowdown, and weakness in heavy industry and construction is now spreading to exports and consumption. Meanwhile financial markets are in turmoil and the reform agenda is disappointing. Another step down in growth looks inevitable.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    A Worrying Set Of Signals

    Regular readers will know that we keep a battery of indicators to gauge, among other things, economic activity, inflationary pressure, risk appetite and asset valuations. Most of the time this dashboard offers mixed messages, which is not hugely helpful to the investment process. Yet from time to time, the data pack points unambiguously in a single direction and experience tells us that such confluences are worth watching. We are today at such a...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Libor Not Lehman

    With shares in Volkswagen down -28% since the diesel emissions rigging story broke last Friday, VW bond yields up sharply, and the securities of other European automakers hit hard by the news, investors face some uncomfortable questions. Is the risk posed by the scandal idiosyncratic, with the fallout likely to be confined largely to VW itself? Or could the risk prove systemic, with potentially catastrophic implications for the broader European...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Dragonomics

    The Mixed-Up Case Of Mixed Ownership Reform

    China’s long-awaited plan for state-owned enterprise reform centers on the vague concept of “mixed ownership.” This new slogan at first seemed to promise more privatization of state enterprises and a greater role for the private sector. But in actual practice, mixed ownership does not look much like privatization at all.

    6
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Has Abenomics Failed?

    Has Abenomics failed? On paper, the answer is an unequivocal “yes”. Almost three years after the election of Prime Minister Shinzo Abe, the “three arrows” of his economic revitalization program—stimulative fiscal policy, massive central bank monetary expansion, and far-reaching structural reforms—have missed all their declared targets. Far from accelerating to a trend growth rate of 2%, Japan’s economy has faltered, contracting at an annualized...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Gastarbeiter Redux

    The influx of hundreds of thousands of asylum seekers from war torn Syria, Afghanistan, Iraq and parts of Africa has laid bare familiar divisions within the European Union. This week’s deal to relocate 120,000 more refugees from Greece and Italy on top of the 40,000 agreed in May starts to address the problem. Many multiples more are making the trip to Europe, but only one country—Germany—is promising to take large numbers. Commentators often...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Dragonomics

    The Diverging Fortunes Of The Two Chinas

    One of the most important facts about China’s current slowdown is how unevenly distributed it is. There is a huge and growing gap between different sectors and provinces; in economic terms there are effectively “two Chinas.” Understanding this disparity is key to assessing China’s growth prospects, financial risks and global impact.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    What The VW Scandal Could Mean

    Last year as Europe tightened economic sanctions on Russia for its role in fomenting the Ukrainian conflict, German business confidence readings took a bath. This was not surprising as German exports to Russia—a one time key growth market for Teutonic metal bashers—have shrunk by about €9bn in two years. However, once the dust settled on 2014 it became clear that far from being decimated, Germany’s highly diversified exports had actually risen...

    0
  • Gavekal Research

    Philosophical Dominance, Profits And Stocks

    Let us start with a simple idea, which also happens to be validated by the data: stock market returns and corporate profits over the long term have the same growth rate.

    1
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Wrong End Of The Fed’s Stick

    Friday’s market action spoke volumes about the jitteriness of investors. After the Federal Reserve decided on Thursday not to raise US interest rates, at least for the time being, the S&P 500 sold off -1.6% in the following day’s trade. The reaction in Europe was even more extreme, with the Euro Stoxx 50 falling -3%. Rather than taking the Fed’s dovishness as a positive sign, it seemed that equity investors instead asked what bad news...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Fed Throws EMs A Lifeline

    The Federal Reserve’s decision to keep on procrastinating over a rate hike should have come as no surprise to anyone who has paid attention to the comments of Janet Yellen. And indeed it didn’t come as much of a surprise to the markets, to judge by their reaction yesterday. After a brief flurry of activity following the announcement, the US equity market closed little changed on the day. Currency and bond markets proved a bit more excitable, but...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    How Much Does China Really Matter?

    How much does China’s slowdown really matter to the rest of the world? At first this might sound like a silly question. After all, China is home to a fifth of humanity, it is the world’s second largest national economy and its second largest importer, and in recent years has contributed between a quarter and a third of global growth. What’s more, the recent volatility in China’s stock markets and exchange rate caused shockwaves around the world...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Europe And Chinese Risk

    Yesterday Joyce argued that the slowdown in China was not a major problem for most developed economies (see How Much Does China Really Matter?). Arguably an exception to that general observation are Europe’s multinationals, which over the last decade or so have thrived by selling goods that Chinese firms and households love to buy.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Dragonomics

    From Empire Builders To Traders

    The new oil-market reality of abundant supplies and low prices is sapping the financial and political power of China’s state-owned oil companies. So they are reducing their capital spending and domestic output, and ramping up their oil trading operations—and shaking up markets in the process.

    1
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Is The China Panic Abating?

    For the past six weeks, global markets have been in a China-centric panic, sparked partly by bad economic data, but mostly by policy bungling from China’s policymakers. Having spurred a huge expansion in equity margin debt, regulators turned tail in June and cracked down on the practice. As an equity market crash unfolded, policymakers took to swinging a big stick: price-keeping operations were tried, stock trading was halted and speculators...

    5
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Why Malaysia’s Falling Knife Is Worth Catching

    The downgrade of Brazil’s debt last week to junk status has renewed fears that emerging markets may face another vicious sell-off. To date EM angst has mostly focused on resource exporters made fragile by the China-induced commodity bust. But the prospect of an imminent US interest rate hike has focused attention more generally on markets with heavy foreign currency debt exposure. Malaysia looks to face the worst of all worlds as its external...

    8
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Fed’s Opportunity For Lift Off

    There are many problems in the world today, but too-high a cost of capital is not among them. This is not going to change if the Federal Reserve hikes short rates by a quarter of a percent this week, or in December. We have no particular insight as to when the Fed will make its move, but there are good reasons for it pull back on the “lift off” lever before the end of the year. Recent ructions in global markets are not likely to deter Janet...

    6
  • Please login, request a trial or contact our sales team for more information

    Gavekal Dragonomics

    The Flailing State Of Enterprise Reform

    A decisive move on economic reform would be very helpful in demonstrating that China is still on the right track. Unfortunately the long-awaited plan for state-owned enterprise reform is not such a move. Instead it is an ungainly mishmash of bureaucratic compromises that sets no clear goals and is riven by internal contradictions.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Deleveraging In The Emerging World

    There has been a lot of talk in recent weeks about the collapse in emerging market currencies, with extravagant comparisons to the 1997-98 crisis. In reality, however, there is no “crisis”. Over the last three years an equally-weighted index of major emerging market currencies has fallen no more against the US dollar than an index comprising the euro and the yen. And despite all the recent turbulence in financial markets, there have been no...

    1
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Has The Fed Missed The Boat?

    It is decision week at the Federal Reserve. At its meeting this Wednesday and Thursday, the Federal Open Market Committee must decide whether the US labor market has now tightened enough to warrant the first interest rate increase since mid-2006, even though inflation is subdued and financial market sentiment remains fragile following the summer’s bout of heightened volatility. It is an unenviable decision—all the more so since the recent...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Dragonomics

    Taking The Pulse Of The Construction Cycle

    China’s housing-driven industrial cycle is stuck in low gear, but has not worsened dramatically. What is getting worse are the parts of the economy that had been doing better earlier in the year: exports, consumer spending and finance. The result will be headline GDP growth that (finally) falls below 7% in the third quarter.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    How Corbynomics Could Work

    Whatever you may think of Jeremy Corbyn, he has a point about economic policy. Actually he has two good points and one bad one. Corbyn has been right about what he called People’s Quantitative Easing, a potentially transformative idea for restoring economic prosperity that was proposed years ago by several radical economists but had never been taken seriously in Britain until it became the centerpiece of Corbynomics. Corbyn has also been right...

    6
  • Please login, request a trial or contact our sales team for more information

    Gavekal Dragonomics

    No New Coal: Power Sector Crosses Green Energy Threshold

    The combination of structural shifts under way in the economy and new regulations mean that future growth in China’s electricity demand growth can be met entirely from clean energy sources. The implication is that over the coming years, China will no longer need to build new coal-fired power plants.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Has The Asian Currency Collapse Run Its Course?

    The past four months have seen an unprecedented divergence in the performance of developed market and emerging market currencies, with Asian units getting sucked into the EM downdraft even though their manufacturing-heavy economies should, on paper, be beneficiaries of the commodity collapse. Or to be more specific the more than 10% decline in Asian currencies against the euro over the last four months has been a near two standard deviation...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    I Know, I Know...

    ...the US economy is doing fine and after the longest run up in history, may be on the verge of achieving take-off velocity. So why am I so worried? The problem is that my US recession indicator has entered negative territory, after literally collapsing in the last 6 months. Today I will try and explain my concerns about the US, when all others seem fixated by China. It should be acknowledged that since about 2002 the US economy has been managed...

    3
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Is The Bull Market Over? (II)

    Yesterday we examined the three big fears that—in the absence of any markedly negative news from the OECD economies—lie behind the recent equity market sell-off, and which have prompted many investors to ask “Is The Bull Market Over?”

    2
  • Please login, request a trial or contact our sales team for more information

    Gavekal Dragonomics

    Debating The Data Denialists

    There are growing fears that China’s economic statistics are massively overstating growth, so rather than growing by 6-7%, China is now “really” growing by only 3-4%. These worries are overdone: Chinese statistics have problems, but they do provide a broadly accurate view of the growth trajectory.

    1
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Fixing Germany’s Current Account

    Germany’s trade surplus for July rose to a record €25bn, lifting the country’s accumulated current account surplus over the last 12 months to a hefty 8.2% of GDP. The fall of the euro has clearly made German exports more competitive outside the single currency area. As a result, Germany’s expanding trade surplus is by far the dominant influence on the eurozone’s external accounts. Over the last 12 months, Germany’s trade surplus with the rest of...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Is The Bull Market Over? (I)

    Is the bull market in equities over? As our readers might imagine, this is a question we have been asked more than once over the past few weeks. Notwithstanding the bounce of the last two days, the simple fact that clients are wondering about the answer is troubling in itself. Their doubts are embodied by three ominous developments:

    1
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The RMB, The HKD And A Flood Of Cash

    If nothing else, yesterday’s announcement that China spent US$94bn of its foreign reserves in August to prevent the renminbi from falling against the US dollar should convince the doubters that China has no intention of being a mercantilist “currency warrior”. As a result, any bearish case against the renminbi should not rest on the government’s intentions—in spending its US$94bn, the People’s Bank of China has made it clear that it will hold a...

    3
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The US Current Account Deficit And World Markets

    Spotting turning points in the US current account is central to Gavekal’s research method, as such shifts impact all other economic relationships. When the US dollar is strong the US tends to run a big current account deficit, providing the world with lots of “earned dollars.” Conversely, a weak dollar eventually leads to a shrunken US current account deficit and more incentive to borrow in dollars. Big moves in the dollar exchange rate create...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Termaillage And The Renminbi

    For years I have felt like a lone voice in the wilderness, monitoring central bank reserves as an important determining factor of what I loosely call “international liquidity”. Suddenly I’ve got company. In the last few weeks everyone has been focusing on the topic, and “experts” by the dozen have penned reports about it. Naturally, I’ve read everything that has passed across my screen, and—sad to say—I’m appalled by the results: an egregious...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    What To Do With US Bonds

    Given the recent turmoil in financial markets and an intensifying focus on the Federal Reserve’s forthcoming policy decision, it seems a good time to update readers on our thinking about the proper positioning of a US fixed income portfolio. As a starting point, it is worth restating the two main determining factors that influence the yields on longer-dated treasuries.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Dragonomics

    The Nationalist Style Of Economic Reform

    China’s leaders are not far-sighted planners calmly executing a long-term strategy, but politicians responding to events and seizing opportunities. Economic reform in China is not going in reverse, but the nationalist shift in politics means reform is scattershot and opportunistic—and that creates risks and increases volatility.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Dragonomics

    Goose Stepping Into Isolation

    China’s military parade to celebrate victory over Japan 70 years ago will be lapped up by a patriotic nation that revels in shows of national strength. But rather than winning it new friends, China’s military chest-thumping is only scaring its neighbors into the arms of the US. The parade reflects not strength but a chronic lack of self-confidence.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    German Exports Are Not Kaputt

    Predictions of the German export machine’s demise followed southern Europe’s 2011 slide into deflation, the yen’s 2012/2013 devaluation, and now the emerging world’s slowdown. And yet German exports hit a new high in 2Q15 and the latest IFO survey points to more strength in 3Q. Far from going kaputt, German exporters can likely handle an emerging world crunch due to their geographical diversification, the benefit of a weak euro and improving...

    4
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Can Europe Be Part Of The Solution?

    The eurozone is no longer the center of the global market panic, but an interesting question is whether it can be part of the solution. Investors ostensibly sold equities yesterday on more evidence of economic weakness in China. However the deeper fear is of a faltering global growth outlook at a time when the Federal Reserve is looking to hike rates. Eurozone equities topped out back in April as the initial flush of the European Central Bank’s...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Four Horsemen Of The Apocalypse

    Markets are entering bear market territory and what vexes Charles and Louis is whether the root cause is a liquidity crunch, a solvency crisis or a deflationary bust. In this wide ranging chart book they explore the problem through the revelatory prophecy of four riders whose presence marked the coming of judgement day. We don’t mean to pile on the misery in what is shaping up as a tough week and the moderately good news is that the-end-of-times...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Gavekal Monthly: Opportunity Amid Crisis

    Today we launch a new publication, The Gavekal Monthly, which presents our latest investment recommendations, as well as a handy summary of our main views across all economies and markets. Think of it as a snapshot of the collective Gavekal brain. In this issue you'll find: "Opportunity Amid Crisis": Louis's assessment of the current investment environment, with ideas on how best to position your portfolios. Three...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Three Options For Renminbi Policy

    Heavy intervention by the People’s Bank of China has restored stability to the exchange rate, but raised questions about its longer-term strategy. We think the central bank has three options: continue intervention to maintain stability; cease intervention and allow a sizable devaluation; scale back intervention and allow a gradual depreciation.

    2
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The World Monetary Base And The Dollar

    If the supply of US dollars is declining then, all else being equal, the value of the dollar should rise, and vice versa. This truism can be checked by comparing the annual growth rate of the “world monetary base” with changes in the JP Morgan trade weighted dollar. Regular readers will recall that the WMB is simply the sum of the US monetary base and foreign exchange reserves deposited at the Federal Reserve for the account of foreign central...

    12
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Portfolio Construction Towards The End Of The Cycle

    Buy into the rebound or position for the real sell-off still to come? It is a tough question at this point. Most investors are confident we are considerably more than half way through the cycle, but they are far from certain the end is nigh (especially after yesterday’s big upward revision of US GDP). For the bamboozled, the summer sell-off of 1998 offers some interesting parallels.

    4
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    As The Crisis Ebbs, Will Europe Turn Japanese?

    The China-induced crisis of recent weeks was noteworthy for being a major global risk-off event that, for once, was not made in Europe. Indeed as markets crumbled on Monday the euro soared. Europe’s graduation from weak link to quasi safe haven is not so surprising given the patch-up job done on Greece and a gathering cyclical recovery—private sector credit growth in the eurozone for July was a fairly perky 0.7% YoY. The question is whether the...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Dragonomics

    Bubbles, Busts And Regime Change

    Collapsing commodity prices, a deflating bubble on the Shanghai stock exchange, dodgy infrastructure financing schemes. It all sounds a lot like China in 2015, but it happens to be a description of the country in 1910—when China was on the brink of a revolution that would bring down the Qing dynasty.

    6
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Real Message From Oil

    Violent swings in oil prices are destabilizing economies and financial markets worldwide. When the oil price halved last year, from US$110 to US$55 a barrel, the cause was obvious: Saudi Arabia’s decision to increase its share of the global oil market by expanding production. But what accounts for the further plunge in oil prices in the last few weeks—to lows last seen in the immediate aftermath of the 2008 global financial crisis—and how will...

    18
  • Please login, request a trial or contact our sales team for more information

    Gavekal Dragonomics

    What To Worry About, And What Not To In China

    The unexpected devaluation of the renminbi earlier this month focused international attention on the continuing slowdown in China and triggered increased worries about its problems. In this piece, we detail four areas where fears about economic fragility have been overstated, and four areas where investor concerns are justified.

    3
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Surviving The Bear Market

    Never mind whether investors in US equities should buy the dip. The question now is whether a six year bull market is yielding to a bear market. Bears are stealthy animals that tend to creep up unannounced. I have had the nagging suspicion for a while that we were approaching grizzly territory and have been recommending an increasingly conservative portfolio positioning (see Protect And Survive). However, the core of my investment philosophy...

    13
  • Please login, request a trial or contact our sales team for more information

    Gavekal Dragonomics

    China’s Broken Directional Signal

    There has clearly been a recent breakdown of communication between Beijing and global financial markets. The underlying problem is that policies that are good for China are bad for the rest of the world, and vice-versa. Beijing has not made clear whether it will do what’s right for China, what’s right for the rest of the world, or neither.

    1
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    No Light At The End Of The Tunnel

    Four years of grizzly underperformance has turned everyone into an emerging markets bear. First it was the currencies of the twin deficit countries that took a hit in the 2013 taper tantrum. Then it was the EM resource producers that faced the crunch when commodity prices halved in just 12 months. Now liquidity which had found its way into the healthier emerging markets in Asia is rushing out the door after China’s currency shock tilted the risk...

    1
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Who Benefits From The Fall Of Europe’s Export Champions?

    Panic in the emerging world has reverberated back to the European equity markets through the de-rating of high quality exporters. What we call “export champions” get more than half of their sales from outside Europe and account for about half of Europe’s market value within broad indices. Yet the travails currently faced by this group have not resulted in Europe’s domestically-focused “national victims” outperforming. Instead, it is the “...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    A Solvency Crisis Or A Liquidity Crisis?

    Over the past five years, critics of zero-interest rate policies have typically fallen into one of two camps:

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Four Horsemen Of The Apocalypse

    In almost every good movie battle scene, the heroes must face attacks on several fronts at once. Invariably, as losses mount, the defensive perimeter shrinks until, with American movies at least, (Saving Private Ryan, Fury…) the cavalry arrives in the nick of time, and our heroes are saved. If the movie is French (La 317eme Section) the position gets overrun and, like in Camerone or Dien Bien Phu, a glorious disaster ensues. Right now, many...

    1
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    How To Build A Reserve Currency

    A store of value, a unit of account and a medium of exchange—these are the three essential characteristics of any proper currency. Needless to say a reserve currency must possess all three. But they are far from enough. A reserve currency must have at least six other attributes too, as Jacques Rueff and Robert Triffin did so much to establish.

    1
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Bright Spot In The US Market

    Even though US home prices have risen by more than a third in the last three years, the residential construction sector has been a persistent disappointment, showing little meaningful recovery. That is finally changing. On Monday the National Association of Homebuilders’ Housing Market Index hit its highest level since 2006, while July data released yesterday showed housing starts closing in on an eight-year high at an annualized 1.2mn rate....

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Modest Eurozone Growth May Be Enough To Lift Markets

    Eurozone economic growth disappointed in the second quarter, coming in at 0.3% quarter-on-quarter, compared with the expected 0.4%. At 1.2%, the year-on-year growth rate was the highest since 2011, but it remains too weak for comfort. For equity investors, it is crucial that gross domestic product grows strongly enough for corporate profits to rise significantly (see What A Few Decimals Of GDP Growth Could Change). Happily, corporate earnings...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Dragonomics

    Expect The Unexpected

    The last couple of months have caused whiplash for China-watchers: first, the government creates huge uncertainty by a massive intervention to prop up the stock market. Next, the government creates huge uncertainty by giving up much of its historic control over the exchange rate. So does the Chinese government love markets or hate them? It is hard to tell a consistent story either way (though that hasn’t stopped people from trying). The one...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    What About The Dollar?

    Often as not the crucial signal offered by markets is what, at a particular juncture, they did not do. This is especially the case when events unfold, that, on the face of it, add credence to a consensus view. With this in mind consider a few key market developments from last week.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Four Lessons And Three Forecasts From A Busy Week In China

    It has been an exciting week in China. Now that the dust has settled and the renminbi seems once more on a firm footing, it is time to step back and consider what we have learned. We offer four lessons, and three forecasts for what the new renminbi regime portends.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Conference Call Following The Renminbi Devaluation

    After the renminbi’s devaluation investors have been left with more questions than answers. In this conference call, Louis Gave assesses the resulting investment scenarios for China and the rest of the world.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Emerging Asia’s Nightmare

    The investment case for Asian currencies has been a tough one to make over the last year as stagnant global trade and a stronger US dollar has constrained the growth outlook. Still, until this week’s “renminbi shock”, the region’s reasonable fundamentals and decent yields continued to justify a holding in Asian currencies. After China’s “devaluation”, this risk-reward position has changed as regional currencies look like prime victims of Beijing...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Four Lessons And Three Forecasts From A Busy Week In China

    It has been an exciting week in China. Now that the dust has settled and the renminbi seems once more on a firm footing, it is time to step back and consider what we have learned. We offer four lessons, and three forecasts for what the new renminbi regime portends.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    New Renminbi Policy Cannot Reverse China’s Slowdown

    Weak growth will prompt the government to enact more supportive policies in the months to come, but at best these will stabilize the slowdown. They are unlikely to turn the cycle around. A weaker currency—the renminbi is now down 3% against the US dollar since Tuesday’s surprise policy change—will also do little to support domestic activity.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Cutting The Tail Of The Dog

    When docking the tail of a dog there are (in theory at least) two ways by which the offending appendage can be removed: it can be amputated with a single incision, or instead sliced incrementally so that the poor creature barely notices its loss. The same logic applies to economic policymakers when a “tough” decision has to be made. The Thatchers of this world go for a single chop, while the likes of Hollande or Chirac will always plump for...

    3
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    China’s New Exchange Rate Policy

    It looks, at long last, as if China is serious about having a largely market-driven exchange rate. After Tuesday’s surprise move, which saw the People’s Bank of China push the daily fixing of the renminbi against the US dollar down by -1.9% and declare that future fixings would be determined by the previous day’s closing spot rate, the central bank followed through today. Wednesday’s fixing, at CNY6.33, closely matched the prior day’s close, and...

    3
  • Please login, request a trial or contact our sales team for more information

    Gavekal Dragonomics

    The New Exchange Rate Policy

    It looks, at long last, as if China is serious about having a largely market-driven exchange rate. But ignore the silly headlines about “currency wars”. China’s move has little to do with competitive devaluation and a lot to do with enabling the renminbi’s admission into the IMF’s special drawing rights basket.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    What Is The PBOC Really UP To?

    The People’s Bank of China sprang a surprise this morning, lifting the daily fixing rate for the US$-CNY exchange rate by 1.9% and triggering an effective 1.8% devaluation of the renminbi—the currency’s biggest one day move since July 2005 when Beijing started its exchange rate reforms. At first glance today’s move looks like a response to months of dismal trade data. In our view, however, today’s exchange rate move is a lot more than a panic...

    10
  • Please login, request a trial or contact our sales team for more information

    Gavekal Dragonomics

    What Is The PBOC Really Up To?

    The People’s Bank of China sprang a surprise this morning, lifting the daily fixing rate for the US$-CNY exchange rate by 1.9% and triggering an effective 1.8% devaluation of the renminbi—the currency’s biggest one day move since July 2005 when Beijing started its exchange rate reforms. At first glance today’s move looks like a response to months of dismal trade data. In our view, however, today’s exchange rate move is a lot more than a panic...

    2
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Strong US Data Confirm Underweight

    Data released on Friday reaffirmed the robust health of the US domestic sector. Paradoxically, this only strengthened our conviction that investors should underweight US equities in favor of other markets.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Dragonomics

    The Infrastructure Conundrum

    Officials are once again promising to boost public works to support growth. But infrastructure spending is unlikely to accelerate sharply from its already rapid pace. With little pressure on existing infrastructure, it is harder to justify new rail and power projects. And projects that do get built will be at more risk of making poor returns.

    1
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Long Live US Productivity Growth!

    The contrast between last Friday’s strong US employment report and the very pedestrian GDP figures published three days earlier draws renewed attention to the greatest paradox of the post-2008 economic recovery. GDP growth since 2008 has indicated the weakest cyclical expansion on record, but employment growth has been roughly as strong as usual, at least in the US and Britain. Post-crisis US employment has grown fairly steadily at a rate of 1.5...

    2
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Bankrolling The Eurozone Recovery

    Europe’s banking sector has been catching the eye with 18 out of the 31 banks in the STOXX Europe 600 reporting positive earnings surprises and almost all beating sales targets. It may be too early to declare Europe's banking sector as being off to the races after a seven year nightmare that started in August 2007, but we see three big trends in the results.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Sorry Singapore Patriots, You Are A Great Short

    On most matters the Gavekal house view is best explained by the fact that we don’t have one. Charles for now stands out as the house bear due to his concerns about a global system enfeebled by policymakers’ misguided efforts to ameliorate all risks. Our more bullish group, led by Anatole, reckons that “creative destruction” is afoot, but outdated national income accounting tools are not capturing the benefits delivered by digital globalization....

    1
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Japan’s ROE Revolution

    The adoption of a UK-style “stewardship code” and an officially sanctioned index of companies that satisfy minimum corporate governance standards (JPX-Nikkei Index 400) marks a serious attempt by Japan to boost both corporate productivity and shareholder returns. This effort is integral to the economic rejuvenation plan of Prime Minister Shinzo Abe, and arguably failure is not an option for an economy that a few years ago had started to flirt...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Capital Account Deficit Is The New Normal For China

    China’s official foreign exchange reserve has declined by US$300bn in the last 12 months, while the capital account deficit has widened significantly. The concern is that as the tide rolls back on a long boom, capital is fleeing the world’s second largest economy. Since China has lots of debt and has seen a sharp economic slowdown in the last two years, such worries are understandable. We have previously offered a contrary take on this view (see...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Stop Worrying And Learn To Love Cheap Oil

    In almost every financial cycle there comes a point when the publicly expressed views of analysts and investors diverge completely from market behavior. Occasionally this can be what George Soros has called a moment of truth, when investors suddenly realize that a financial boom has wildly overshot economic fundamentals and is about to turn to bust. But often it turns out that the markets have grasped a message that has not yet been consciously...

    5
  • Gavekal Dragonomics

    Are Multinationals Losing The Chinese Consumer?

    Rising Chinese incomes should in theory be good for multinational companies. But in the automobile market, there are now signs that local Chinese companies are capturing much of the gains from the new stage of consumer spending—a worrying development for multinationals counting on China growth.

    2
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Tech As A Commodity

    Technology equities have been a solid performer in the post-2008 crisis era, which is perhaps not surprising as the sector tends to do best in periods of innovation-fueled “creative destruction” and strong deflationary forces. Yet with the tech sub-index having outperformed the S&P 500 by more than 15% over the last two years, there are clear indications that this phase may have played out. Not only are the cyclical drivers ebbing, but the...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Growth & Markets Monthly (August 2015) – by Pierre Gave

    Our latest monthly indicators look to have taken on a somewhat schizophrenic character. On the growth side, our main indicator of global economic activity is perking up, implying a stronger second half of the year. But our diffusion index of OECD leading indicators is clearly heading south, as are commodities. A similarly bifurcated story can be seen on the risk-appetite side. Our velocity indicator has registered improvement and short term...

    1
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Good News In EU Investment

    When the stimulative effects of the weak euro and the fall in oil prices fade from the picture, what will sustain Europe’s growth? At first glance it is unlikely to be investment. Structural reforms were meant to cut the costs of doing business, increasing returns on capital and so providing firms with both the confidence and the resources to expand production. Yet a glance at the headline numbers suggests things haven’t worked out that way. In...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    More Cautious Than Ever On US Stocks

    Exactly six months ago, we declared we were Turning Cautious On US Equities. At the time we noted that while US domestic demand was healthy, US stocks no longer looked cheap, the US dollar was no longer competitively valued, and the Federal Reserve was moving unambiguously towards tightening monetary policy. Half a year later, the S&P 500 has risen 4.3% and the Nasdaq Composite 9.2%. On the face of it those look like respectable returns; not...

    1
  • Please login, request a trial or contact our sales team for more information

    Gavekal Dragonomics

    Housing: From Suppression To Support

    After two rounds of relaxing housing policies, China’s authorities have almost run out of ammunition within the existing policy framework. As a result, the authorities are eyeing new tools to support demand: a greatly expanded market in mortgage-backed securities and a housing policy bank to help finance home purchases.

    2
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Who Killed US Productivity Growth?

    Four and a half years ago, in February 2011, I published one of my first pieces of Wicksellian research, entitled The High Cost Of Free Money. In it I wrote that negative real interest rates were going to cause a sustained decline in the productivity growth of US labor, which in turn would lead to a deterioration in the structural growth rate of the economy. In making these observations, I was merely following the logic of 19th century Swedish...

    7
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Three Ugly Charts

    I would never claim to be an accomplished technical analyst, but I do know how to use a ruler when looking at charts of prices in the markets.

    5
  • Please login, request a trial or contact our sales team for more information

    Gavekal Dragonomics

    China Update: Weak Imports Are No Mystery

    Something has happened to China’s demand for imports. In the first and second quarters, the country’s goods imports fell by about -15% year-on-year in nominal terms, even as real GDP grew 7%. Clearly some of the decline is due to the drop in prices of raw commodities, which are among China’s biggest imports. But WTO data shows China’s imports in volume terms were down -12% in 1Q, and preliminary figures point to continued volume declines in 2Q....

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Five Corners (July 29): The Slowdown In Trade

    Overview: After years in which the world’s major governments have been busy manipulating prices, Charles Gave finds it astonishing that anyone should be surprised by the current slowdown in global trade.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    One China, Three Worries

    The week started badly, and the epicenter of bad news was China. On Monday the Shanghai Composite Index lost -8.5%, its second worst day ever, erasing virtually all of the gains from the previous two weeks of all-out government support. Commodity markets, which had been sickly anyway, followed suit, as did various other China-linked assets, such as mining stocks and the Brazilian real. More broadly, people are starting to question whether the...

    2
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    5C Asia: No Escape From The Regional Trade Slowdown

    Asia’s trade performance has been disappointing. After a two-year post-crisis rebound in 2010-2011, export growth in the region has slowed to an annual average of 7.5% in US dollar terms and 6% in volume terms. Compare that with US dollar growth rates of 30% seen in the years before the crisis.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Three Risk Factors For US Growth

    In the run-up to the meeting this week of the rate-setting Federal Open Market Committee and the release on Thursday of second quarter gross domestic product data, confidence in the strength of US economic activity is deteriorating. It is not just that most market participants now expect 2Q growth to be modest relative to last year, with the consensus looking for an annualized QoQ figure of 2.7% compared with 4.6% for 2Q14 (see Not Déjà Vu Again...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Dragonomics

    Why China Inc. Has Stopped Investing

    China’s investment growth is now the slowest it has been in recent memory, and it continues to decelerate. This extended slowdown is the result of longer-term shift in China’s growth drivers: the end of the supercycle in housing demand. Until the industrial sector can adjust to this new reality, investment growth will remain sluggish.

    6
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    5C United States: Who Gains From The Widening US Trade Deficit?

    After four years of US dollar real effective exchange rate appreciation, the US trade deficit is finally showing signs of widening. Both exports and imports have slumped heavily in value terms, largely because of a combination of weak oil prices and US dollar strength. Trade volumes paint a clearer picture, with exports down -0.5% year-on-year in May, while imports rose by 3.5%. As a result, the US trade deficit has expanded from 2.5% of GDP in...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    5C China: Weak Imports Are No Mystery

    Something has happened to China’s demand for imports. In the first and second quarters, the country’s goods imports fell by about -15% year-on-year in nominal terms, even as real GDP grew 7%. Clearly some of the decline is due to the drop in prices of raw commodities, which are among China’s biggest imports. But WTO data shows China’s imports in volume terms were down -12% in 1Q, and preliminary figures point to continued volume declines in 2Q....

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    5C Overview: Why The Surprise At Slowing Trade?

    I am afraid I am rapidly turning into Gavekal’s resident bear—asleep half the time, grumpy the rest. In particular, I am amazed how some people have suddenly discovered that world trade is going nowhere, and that they are so bamboozled by this strange pattern. Where exactly have they been for the last 15 years?

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    5C Europe: The Re-Domestication Of European Trade

    Since 2009, European exports have gone from strength to strength. As the rest of the world shook off the effects of the financial crisis, European Union exporters found themselves well-positioned to benefit both from the US recovery and from the rise of the emerging market middle classes. What is more, as deflation set in, Southern European economies directed more capital and marketing resources into their export sectors, reinforcing the...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Signal In Silver (Part II)

    Last year I came up with a chart (shown below) that I found rather intriguing. It showed that on every occasion in the last 100 years when the price of silver dropped more than 25% year-on-year, consumer price inflation in the US took a nose-dive soon afterwards.

    5
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    How Much Upside For UK Gilt Yields?

    Eight years after the UK last raised interest rates, several members of the Bank of England’s Monetary Policy Committee are dusting off their hawkish hats. Yesterday’s MPC minutes revealed growing concerns about inflationary pressure, even though consumer inflation was at zero in June. No rate hike is expected before the first quarter of next year, but with the UK economy set to move into a new, more productive, growth phase, it is worth asking...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Dragonomics

    So You Want To Be A Reserve Currency

    Once every five years the International Monetary Fund reviews the composition of its own artificial currency, the Special Drawing Right. This normally technical and boring process has now become an occasion of high financial drama, thanks to China’s unprecedented campaign to get the renminbi added to the SDR basket. Although there is still debate over the merits of the campaign, all the signals indicate the renminbi will indeed join the SDR...

    5
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Typology Of A Deflationary Bust

    In the summer of 1998 I wrote the first report for a new venture that was eventually to become Gavekal Research. It was called The Typology Of A Deflationary Boom. My contention at the time was that the US was in a deflationary boom and in the report I tried to explain to the tiny handful of readers we then had how to manage money in such a period. Booms and busts tend to be byproducts of the interest rate policies followed by central banks. The...

    18
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    What Price US Growth Stocks?

    Ever since US equities bottomed in March 2009, glamour stocks such as Google, Amazon and Netflix have been at the forefront of the rebound, leading the Nasdaq composite to an all time high this week. While we continue to prefer other markets over the US (see Turning Cautious On US Equities), recent moves in mega-cap US growth stocks have set us wondering how long the outperformance of growth stocks over value stocks can last. After all, even...

    3
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Black Days In Brazil, But No Black Swan

    The end is not yet in sight for Brazil’s dreadful recession. The seasonally-adjusted economic activity index was down –3% YoY in June, and the current consensus forecast for full-year GDP growth is –1.7%, against +0.5% in January. Continued tightening of monetary and fiscal policy, coupled with lackluster external demand, makes possible a second year of economic contraction in 2016. The Brazilian real has lost -16.5% against the dollar this year...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Good News From Greece

    Greece has reopened its banks, paid its dues to the European Central Bank and cleared its arrears with the International Monetary Fund. After five years of pan-European economic depression and the near-death experience in Greece this month, can we finally say that the euro crisis is over? The conventional answer is definitely not. According to the vast majority of political commentators and economists, ranging from left-wing Keynesians such as...

    5
Show me: results